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Canfor Pulp Income Fund Q3 boosted by China demand, higher prices

From Brenda Bouw, The Canadian Press, October 26, 2009 - 3:58 p.m.

Canfor Pulp Income Fund Q3 boosted by China demand, higher prices

By Brenda Bouw, The Canadian Press

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VANCOUVER, B.C. - Strong demand for pulp, particularly in China, helped boost third-quarter profits for Canfor Pulp Income Fund (TSX:CFX.UN), although the higher Canadian dollar was a drag on its results.

"The big story in pulp has all been China," said Paul Quinn, a forestry analyst at RBC Capital Markets.

Quinn cited statistics showing world chemical pulp shipments to China rose 79 per cent for the first nine months of the year. That compares to a drop of 14 per cent in both western Europe and North America.

Demand for pulp plummeted earlier this year, as a consequence of the recession, leading to price drops and production curtailments. Since then, global demand has picked up, along with prices.

Prices for long-fibre northern bleached softwood kraft pulp, also known as NBSK, were US$660 in June rising to US$770 in September with announced prices for October of US$800 and for November of US$830. That's after falling to about US$630 in April.

"The gradual improvement in consumption and continued curtailment of supply of pulp has lead to steady reductions of world pulp supply inventories," Paul Richards, president and CEO of Canfor Pulp Limited Partnership told investors during a conference call Monday.

"The tightening market has enabled suppliers to increase prices in each of the last five months."

Richards also said the company expects market conditions to show "continued but modest improvement," for the rest of the year and into 2010.

Canfor Pulp Income Fund has a 49.8 per cent in the Canfor Pulp Limited Partnership. Canfor Corp. (TSX:CFP) holds the remaining 50.2 per cent interest.

Late Friday, the Vancouver-based fund reported a profit of $8.5 million or 24 cents per unit for the quarter ended Sept. 30, compared to a profit of $5.2 million of 15 cents per unit for the same time last year.

The partnership reported sales of $202 million in the quarter, compared to $215.4 million for the same period last year.

The partnership's net income was $18.3 million or 26 cents per unit compared to net income of $11.1 million or 15 cents per share for the same quarter last year.